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15 Jun 2010

Crude World -- The Review

This book is a must read for anyone interested in the connections between oil, economic development and political realities. Peter Maass (brother of my father's friend) has reported on oil issues from over 15 countries, and this book is a brilliant summary (in 230 pages!) of his nearly 30 years of experience reporting on war, oil and corruption.

The book begins with a vivid image from the early days in the occupation of Baghdad, when American soldiers protected Iraq's Ministry of Oil and let looters invade the National Museum. Maass then makes his key observation: It's not as simple as that.

In the next chapters, Maass explores ten different themes:

Scarcity: Saudi Arabia, peak oil, and the need for the Saudis to maintain the image of limitless supply, even as it's falling.

Plunder: Equitorial Guinea, where the president/dictator steals his people blind, with the help and encouragement of US banks and oil companies. (Theft occurs in three ways: bribes to give access to oil, skimming oil royalties, and profits from businesses that serve oil companies.)

Rot: Nigeria, where the local people grow poorer as oil is pumped from under their land. Shell Oil leaves a few token "developments," but these are often cruel jokes -- hospitals without staff or medicines or generators without gasoline. There's also a strange dance between rebels and the government/Shell. Rebels steal oil to sell, and the government lets them ship it out. Why? It's a cheap pay off, to let the rest of the oil go by free.

Contamination: Ecuador and Texaco's terrible environmental damage. As with Equatorial Guinea, this country was naive with oil firms, so they got the worst cut of royalties and the cheapest extraction technology, which meant gas flares and oil spills. The government was no better when they took over, but they probably did not make a conscious choice to use that technology.

Fear: Azerbaijan and the culture of abuse among oil executives. Maass cites Milgorm's 1960s experiment, where students were happy to torture others, as long as an authority figure told them it was ok. This same "passing the buck" psychology allows oilmen to abuse oil sources to get a few pennies more profit. See previous post here.

Greed: Texas isn't even protected from its own oil companies when they can make a quick buck. More on oil companies desire to cut corners and a prescient (or perhaps trend-spotting) take on a series of stupid moves by BP, each of them resulting from an emphasis on short term profits, and each of them resulting in long term damage and death. The Deepwater Horizon Spill was no accident.

Desire: Iraq and America's desire for their oil. Except that the US was incompetent at taking it over. And the American goal of democracy flies in the face of conventional wisdom -- friendly dictators are much easier partners in the oil business. Maass concludes that Iraq's oil was important, but other goals also mattered.

Alienation: How Saudi oil money has poisoned its people, and how its youth prefer jihad to a life of unemployment or senseless paper pushing.

Empire: Putin is using Russia's oil to rebuild Soviet power, but low prices now will reveal the Emperor's new clothes, as they did to Gorbachev in the 80s. See previous post here.

Mirage: Chavez wants Venezuela's oil to help its people, but subsidies cannot be endless, and they will end when his national oil company flounders under the strain of delivering so many social services.

Maass concludes with a note of hope, hoping that we can use the tools we already possess -- transparency of royalty payments, anti-corruption laws and good old-fashioned social values -- to lighten up the dark side of oil. Oil may have peaked, but its damage will continue until we choose otherwise. (I have just started The Moral Sense. Stay tuned.)

Bottom Line: I give this book FIVE stars for its well-written, wide-reaching and deep discussion of the social, economic and political dimensions of oil.